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Keys to a sustainable multi-generational family business

ALMOST every culture has an aphorism that wealth does not last three generations, but the Jebsen & Jessen Family Enterprise happily defies that adage.

Heinrich Jessen, third generation scion, is chairman of Jebsen & Jessen South East Asia, one of six independent units in the group. The group was co-founded by his grandfather and namesake, Heinrich Jessen, with his cousin Jacob Jebsen in 1895.

Today, the family enterprise is a global diversified operation with tentacles in mining, manufacturing and engineering, while still engaged in the traditional trading business.

Financial prudence and the foresight to climb up the value chain beyond trading play key roles in the business’ longevity. But the family structure for succession is also surely part of the equation. Family members do not automatically inherit positions or shares in the group. Family members who aspire to leadership positions must demonstrate that they are capable and willing to work for the group. Company shares must be purchased.

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Hence, as Mr Jessen said in an earlier published interview, while there are around 300 family members among the Jebsen and Jessen families, there are only three shareholders.

“It is usual in Asia and other parts of the world that the children take over the business, and do so automatically. If you have five children, all five get something. Our structure has served us well... Every model has its pros and cons. What is important is to have rules and those rules are well communicated,” says Mr Jessen.

This edition carries the theme of private banking, the business of managing the wealth of the high net worth. Bankers operate in an enviable environment in Asia, thanks to rapid wealth creation in countries such as China, where billionaires are reportedly minted every other day. For our expert panellists, growth has been robust particularly in 2017, bouyed by strong market returns in addition to inflows.

But there are, of course, challenges. Citi Private Bank’s South Asia Head, Jyrki Rauhio, sounds some notes of caution. The market is roiled by the ongoing US/China trade battle; emerging market currencies have weakened, he points out. Still, he says he is confident of achieving sustainable growth “by continuing to focus on our clients”.

One bright spot, as highlighted in our Spotlight piece, is the increasing take-up among private clients of discretionary portfolio services, where the management of portfolios is handed over to an asset manager. For clients, there are a number of benefits. One is professional management, which should take emotions out of the process. Portfolios are also typically diversified and should outperform over the long run. And, there is the ability to customise portfolios to one’s risk appetite and preferences, subject to an investment minimum.

Elsewhere in this edition, Julia Leong and Kenneth Chia of PwC focus on digital transformation, a buzzword among private banks. Yet while this development is seen as an imperative, there are strategic risks and opportunities in the process.

Withers KhattarWong’s Justin Yip and Lam Zhen Yu examine the interest among high net worth individuals to step up as “white knights” for troubled and insolvent companies. In the offshore & marine sector, for instance, HNWIs have been willing to take a punt. The investments may be a means to diversify a HNWI’s exposures, and they also pay a higher yield, albeit at a higher risk.

In Real Estate, Lee Nai Jia of Knight Frank looks into good class bungalows, the most desirable of property investments. Due to scarcity, average prices of GCBs have trended upwards over time, despite the boom and bust cycles of the private housing market. Interest in GCBs is set to grow, he writes, thanks to interest among the existing pool of ultra wealthy individuals and the newly wealthy.

Meanwhile, Tara Loader Wilkinson takes us on a fascinating journey to Mongolia’s Gobi Desert, where scientists in The Explorer’s Club have unearthed bones from an ostrich-type dinosaur and a turtle-like dinosaur – in addition to as many as 250 new fossil locations.

We hope you enjoy this edition and wish you a rewarding investment journey.